Does The Hype Around SafeCharge International Group Limited’s (LON:SCH) Growth Justify Its November Share Price?

Growth expectations for SafeCharge International Group Limited (LON:SCH) are high, but many investors are starting to ask whether its last close at £2.595 can still be rationalized by the future potential. Below I will be talking through a basic metric which will help answer this question.

Check out our latest analysis for SafeCharge International Group

Exciting times ahead?

Analysts are predicting good growth prospects for SafeCharge International Group over the next couple of years. The consensus forecast from 4 analysts is certainly positive with earnings forecasted to rise significantly from today’s level of $0.160 to $0.225 over the next three years. On average, this leads to a growth rate of 15% each year, which illustrates an optimistic outlook in the near term.

Is SCH’s share price justifiable by its earnings growth?

SCH is available at a PE (price-to-earnings) ratio of 20.78x today, which tells us the stock is undervalued based on its latest annual earnings update compared to the it average of 33.46x , and overvalued compared to the GB market average ratio of 15.91x .

AIM:SCH PE PEG Gauge November 20th 18
AIM:SCH PE PEG Gauge November 20th 18

We already know that SCH appears to be undervalued based on its PE ratio, compared to the industry average. However, seeing as SafeCharge International Group is perceived as a high-growth stock, we must also account for its earnings growth, which is captured in the PEG ratio. A PE ratio of 20.78x and expected year-on-year earnings growth of 15% give SafeCharge International Group a higher PEG ratio of 1.43x. This means that, when we account for SafeCharge International Group’s growth, the stock can be viewed as slightly overvalued , based on fundamental analysis.

What this means for you:

SCH’s current overvaluation could signal a potential selling opportunity to reduce your exposure to the stock, or it you’re a potential investor, now may not be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:

  1. Financial Health: Are SCH’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Past Track Record: Has SCH been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of SCH’s historicals for more clarity.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.